Bear Market

Validea's Guru Investor Blog

A recent article by Jeff Sommer of The New York Times poses the question: “Is this the top of the market? Is it time to sell?” “Simply put,” writes Sommer, “my answer is this: If you’re a stock investor, be prepared for a major decline, not because one is necessarily coming soon but because no one can predict where the markets are heading.” The article points out that the current economic expansion is the third longest since 1854, and that the low volatility has been “almost supernatural.” Regarding the risk of a decline, Sommer offers comments by Vanguard principal Fran […]

In recent years, 85-year-old billionaire George Soros hasn’t done much investing of his own. He has instead focused on public philanthropy and public policy (and is a large contributor to the super PAC backing Hillary Clinton). That changed earlier this year when he began spending more time directing trades at his firm Soros Fund Management LLC, which manages $30 billion for Mr. Soros and his family. Some close to him say that his resurfacing has been triggered by worry about the global economy and subsequent market shifts. This maudlin view has darkened even further over the last 6 months due […]

Liz Ann Sonders, chief strategist for Charles Schwab, outlines the four phases of the stock market over a full market cycle. Since 1960, the market can be seen following the four distinct periods: recession bear, post-recession bull, echo bear and post-echo bull. Recession Bear: these are the big bear markets, usually lasting a few years and averaging declines of 30%. The 2007-2009 bear market, as Sonders points out, fell by 54% so that was a much larger loss than after. Post Recession Bull: this is the immediate 1-2 years following the bear market. There tends to be a large snapback […]

Mark Hulbert writes in MarkWatch: “not infrequently, a bear-market declaration often amounts to little more than closing the barn door after the horses have left.” A bear market is typically defined by a 20% or greater decline in stock prices. In the last U.S. bear market (2011), for example, “the early-October day when the S&P 500 fell to 20% below its late-April high turned out to be the day that the bear market breathed its last gasp.” Because the average length of a bear market since 1900 is 403 days, “even if it is eventually determined that a bear market […]

Barry Ritholtz, Bloomberg columnist and founder of Ritholtz Wealth Management, points out that 2015 has been essentially flat and, looking to history, concludes: “by itself, a flat market does not tell us very much of anything about the following years’ subsequent returns.” He notes that two opposing views are common in predicting markets after flat returns, one bearish (“flattening indicates that markets are setting up for a major correction or worse”) and the other bullish (“a sideways year is a ‘pause and refresh’”). He observes that either can seem compelling “depending on the subconscious bias you may be seeking to […]

Doug Ramsey, CIO of Leuthold Weeden Capital Management, predicts a bear market. Although he expressed similar concerns in August, his past calls have been remarkably accurate and not consistently bearish. For example, he correctly called the rally beginning in 2011 and remained an advocate of bullish positions until 2014. “The odds are very high that the top was in May,” he said,”“I think we’re looking at a cyclical bear market.” He predicts the S&P will be down 20-25% from its May peak in 2015. His reasoning is based on overvaluation. “Profit margins are incredibly high,” he explained, “so you end […]

Jim Rogers, known for the 4,200% gain he and partner George Soros secured over a decade in the 1970s, told a Barron’s interviewer that he sees a significant bear market coming. “In America we’ve had economic setbacks every 4 to 7 years since the beginning of the Republic and chances are that we’re certainly getting closer to being due . . . and the next bear market is going to be worse than most of us have experienced because the debt is so much higher.” He also noted that right now “is the first time in recorded history that […]